LONDON: Zegona Communications plc announced that a wholly-owned subsidiary of MasMovil Ibercom, has launched a tender offer to acquire its 100% of Euskaltel S.A. for €11.17 per share in cash.

Euskaltel is Zegona’s Spanish telecoms investment and its main asset. Zegona is the lead shareholder in Euskaltel, owning 21.4% of the company (38.3 million shares).

Attractive valuation for Euskaltel

· MasMovil’s Offer at €11.17 per share in cash values Euskaltel’s equity at €2.0 billion, equating to an Enterprise Value of €3.5 billion2

· The transaction represents a 27% premium to Euskaltel’s 30-day VWAP3

· The transaction values Euskaltel at 10.1x EBITDA and 21x Operating Cash Flow, a significant premium to European telecommunications multiples4

Substantial value creation for Zegona shareholders

· The Offer values Zegona’s 21.4% shareholding at c.€428 million

· This equates to a Zegona Underlying Asset Value of £1.70 per share1, which represents an 80% premium to Zegona’s current share price (94.5p)5

· The Offer represents a return on Zegona’s Net Invested Capital of 87%6

Euskaltel’s largest shareholders committed to transaction

· Euskaltel’s three largest shareholders (Zegona, Kutxabank and Alba), who own over 52%, have entered into irrevocable undertakings to tender all their shares

· Approach considered friendly and attractive by Euskaltel’s Board – Euskaltel has entered into a Collaboration Agreement with MasMovil in relation to the Offer

Eamonn O’Hare, Zegona’s Chairman and CEO commented: “When we originally invested in Spain in 2015, we identified the opportunity for substantial value creation, with further upside potential from industry consolidation. In 2019, we became Euskaltel’s largest shareholder and, through the introduction of José Miguel García as CEO and Board representation, we implemented our plan to drive significant change in the business.

This included realising synergies from the combination of the three northern Spanish CableCos, getting the combined business back to growth and expanding nationally by launching the Virgin telco brand. Today’s offer underscores the success of our strategy in Spain and provides significant value creation for Zegona shareholders.”

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Euskaltel is the leading converged telecommunications provider in northern Spain and has recently expanded to offer services nationally. It provides high speed broadband, data-rich mobile, advanced TV and fixed communications services to residential and business customers under the Euskaltel, R Cable, Telecable and Virgin telco brands. Euskaltel is a public company traded on the stock markets of Bilbao, Madrid, Barcelona and Valencia.

Zegona was established in 2015 with the objective of investing in businesses in the European Telecommunications, Media and Technology sector and improving their performance to deliver attractive shareholder returns. Zegona is led by former Virgin Media executives Eamonn O’Hare and Robert Samuelson.

Zegona’s first transaction was the €640m acquisition of Telecable in August 2015, the leading quad-play telecommunications operator in Asturias, Spain. In 2017, Zegona sold Telecable for a total consideration of up to €701 million7 to the northern Spanish telecoms group Euskaltel. As part of the transaction, Zegona returned £140 million of capital to its shareholders and became a 15% shareholder in Euskaltel.

In 2019, Zegona became the largest shareholder in Euskaltel and through the introduction of José Miguel García as CEO implemented a plan to drive significant change in the business including the introduction of the Virgin telco brand to expand nationally. https://www.zegona.com